Explain one benefit and one limitation to Yasin of using a break-even chart.

Mark scheme

Marking points from the official mark scheme (May/June 2022). The mark or mark type is shown in brackets.

1. [1] Benefit: Shows break-even output
2. [1] Explanation: Yasin knows how much bread he needs to sell to break even – this will allow him to plan the bakery and equipment required – to ensure at least the minimum quantity of bread is produced and sold.
3. [1] Benefit: Shows the margin of safety
4. [1] Explanation: this is the amount of bread Yasin predicts will be sold above the break-even output – it provides a target for sales of bread so that MB makes a profit.
5. [1] Benefit: Helps in decision making
6. [1] Explanation: Yasin knows the minimum target amount of bread to produce – he can see if he needs to increase the price to break-even more quickly – or if lower ingredient costs is required by MB to make a profit.
7. [1] Benefit: Shows the area of profit or loss
8. [1] Explanation: what the output needs to be to cover all costs – if the market research shown in the business plan does not indicate that sufficient sales will be made to make a profit – then Yasin may need to think again about his plans for the bakery.
9. [1] Limitation: A break-even chart assumes all the output will be sold/provides an estimate of sales
10. [1] Explanation: MB may not sell all the bread in the day – some may be wasted and the costs of producing these will not be taken into account – so at a specific output the business may not make a profit but may make a loss.
11. [1] Limitation: The break-even chart is drawn on the assumption of straight lines
12. [1] Explanation: when the output is higher Yasin may be able to bulk buy ingredients – this may mean he can receive discounts so the variable cost per unit may not be constant.
13. [1] Limitation: Fixed costs/variable costs may change
14. [1] Explanation: if the scale of production changes as the bakery expands – the rent or depreciation of equipment will change/ingredient costs may change.
15. [1] Limitation: Need a separate break-even chart for each product/need a new chart if prices are changed
16. [1] Explanation: relevant if going to make cakes.
17. [1] Kaizen Advantage: Employees might be able to offer suggestions about how small continuous changes may improve the efficiency of the bakery.
18. [1] Kaizen Advantage: Helps eliminate waste - time is not wasted between tasks / eliminating waste of space / eliminating wasted resources.
19. [1] Kaizen Advantage: As there is less time between the different processes of baking bread - it can lead to increases in productivity/efficiency.
20. [1] Kaizen Advantage: There should be less work-in-progress – as the flow through and layout of the bakery is more efficient, and the amount of part-finished bakery products should be reduced.
21. [1] Kaizen Disadvantage: The 2 employees may not be willing/able to make suggestions for improvements.
22. [1] Kaizen Disadvantage: The employees may have reduced hours if efficiency is improved which may make them reluctant to help.
23. [1] Kaizen Disadvantage: It will take time and/or money to reorganise the bakery to improve the flow of products through the different processes.
24. [1] Kaizen Disadvantage: Yasin may not have the skills and knowledge to do this effectively - may have to pay someone else to plan the bakery layout – increased costs for a small business in the short-term.
25. [1] Kaizen Disadvantage: There may be a limit to the improvements MB can make using Kaizen.
26. [1] Just-in-time inventory control Advantage: Reduces the costs of holding inventory of ingredients such as flour.
27. [1] Just-in-time inventory control Advantage: Less working capital required to pay for inventory.
28. [1] Just-in-time inventory control Advantage: Less storage space required - reduces costs or makes more effective use of the bakery production area.
29. [1] Just-in-time inventory control Advantage: Bread and cakes will be fresh due to fresh ingredients - helps ensure customer satisfaction.
30. [1] Just-in-time inventory control Advantage: No excess ingredients purchased - so does not go out-of-date/does not go stale.
31. [1] Just-in-time inventory control Disadvantage: If there is an increase in demand for certain types of bread, then there may not be sufficient ingredients to meet the increased demand.
32. [1] Just-in-time inventory control Disadvantage: Any delays in orders being delivered may disrupt production and may stop the production of some items.
33. [1] Just-in-time inventory control Disadvantage: It relies on a good relationship between Yasin and his suppliers.
34. [1] Just-in-time inventory control Disadvantage: Relies on Yasin making the orders quickly when needed.
35. [1] Justification (Kaizen): Kaizen is the most effective because it could save time between the different tasks performed in the bakery. This may speed up baking and allow more output to be produced in a shorter time period therefore increasing the output of bread and increasing revenue or reducing costs as more efficient. JIT is less important as the bread is baked each day and ingredients will need to be purchased regularly anyway.
36. [1] Justification (JIT): Less working capital is required for JIT, so this is the best option for a small bakery as Yasin is likely to have limited funds to run the new business. The bread is made each day so fresh ingredients are required, and this makes JIT the most suitable because a small bakery may have limited opportunities to implement Kaizen ideas.